Political Philosophy – Capitalism
Industrial capitalism implies the investment of capital in manufacturing industry, with a subordination of labour to such investment and a focus on the maximum extraction of profits as returns on investment. It may be distinguished from trading capitalism or finance capitalism which has commercial and financial transactions respectively as their focus.
Dictionary of Social Sciences explained capitalism as denoting an economic system in which the greater proportion of economic life, particularly ownership of and investment in production goods, is carried on under private (i.e. non-governmental) auspices through the process of economic competition with an avowed incentive of profit.
Wealth amassed by capitalism differs in quality as well as quantity from that accumulated in pre-capitalist societies. Wealth under capitalism is typically accumulated as commodities or objects produced for sale rather than for direct use by its owners.
Rise of capitalism is associated with three main features: (1) the growth of the capitalist spirit i.e. the desire for profits, (2) the accumulation of capital, and (3) the development of capitalist techniques.
Evolution and Types Of Capitalism
- Marxist historians have identified a series of stages in the evolution of capitalism; merchant or commercial capitalism, agrarian capitalism, industrial capitalism and state capitalism.
- The first stage, i.e. mercantile or commercial capitalism provided the initial thrust and impetus for capitalism in the sense that merchants started becoming entrepreneurs to cater to market demands by employing wages labourers as well as by exploiting the existing craft guilds.
- Commercial Capitalism metamorphosed into industrial capitalism, which again, according to Marxist economists, gave way to socialism.
- Commercial Capitalism and agrarian capitalism were, therefore, two forms of capitalism that overlapped with each other, the difference between them being that one emerged out of commercial surplus while the other out of agricultural surplus.
- Agrarian capitalism sometimes metamorphosed fully into commercial capitalism i.e. invested the entire surplus accumulated from agriculture into commerce and sometimes transformed directly into industrial capitalism by investing in industrial development alone.
- Sometimes capital was accumulated from both these sources, i.e. commerce’s and agriculture, and paved the path for the rise of industrial capitalism.
- Agrarian capitalism was emphasized by Immanuel Wallerstein who adopted a world-economy perspective, and considered its origin to be rooted in the agrarian capitalism.
- According to Wallerstein, in world economy, there existed certain zones—like the periphery, the semi-periphery and the core. The strong states imposed unequal exchange upon the weak states.
- Therefore, the strong states or the core dominated the entire world economy in agrarian capitalism which was the essence of a national economy where production is separated from consumption, and is made a source of profit after being utilized in profit- making enterprises.
- Agricultural revolution, therefore, played a very significant role in the growth of capitalism by feeding a growing population and by creating a surplus to meet the demand for industrial raw materials.
- A fourth form of Capitalism is —state capitalism—defined by Lenin as a system under which state takes over and exploits means of production in the interest of the class which controls the state; but the phrase, ‘state capitalism’, is also used to describe any system of state collectivization, without reference to its use for the benefit of any particular class.
- There is a fifth form in which there is an increased element of state intervention either in terms of welfare programmes of lessening the impact of business cycle. This is welfare capitalism or protected capitalism. Precisely, capital accumulation out of the profits of merchants to be invested in various economic activities was what is called commercial capitalism. It tools different forms in different stages. For example, it existed in some of its elements in ancient Egypt and in ancient Rome. The ancient times were the age of capitalist accumulation, rather than capitalist production.
Commercial Capitalism
According to Sombart, Commercial Capitalism or ‘early capitalism’ operated within the feudal framework. Main feudal features of this phase were as follows. Work was generally done in the homes of the producers and not under the factory shades of modern industries.
Effect on society
- The pre-capitalist social system that of the ancient regime was one of ‘estates.’ An estate was a stratum in which all the three major benefits—privilege, power, and prestige—were largely determined at birth and, also were fixed as legal inequalities.
- The modern bourgeoisie grew out of the Third Estate first demands of this new class was legal equality of all-or at least of those above a certain minimal level of wealth.
- Max Weber placed the contrast between estates and classes at the core of his theory of social stratification and Marx made this a key criterion in his analysis of what constituted a class.
- When Marx used the concept of class in political analysis, he held that a class must have a certain degree of cohesion and sense of common purpose, as well as common relationship to the means of production.
- Feudal estates were too internally stratified to possess this attribute. One very significant change with capitalist industria- lization has been the enormous expansion of the middle strata.
- The basic cause of this development was undoubtedly technological. An ever-smaller portion of the labour force was required for the actual tasks of material production, allowing the diversion of ever larger numbers of workers into administrative activities. There was also a vast expansion of the state bureaucracies.
- Effective control over economic resources rather than legal ownership of them is the defining criterion for the top capitalist class.
- Thus Nicos Poulantzas, in Classes in Contemporary Capitalism begins by defining the bourgeoisie not in terms of a legal category of property ownership but in terms of ‘economic ownership’ (that is, real economic control of the means of production and of the products) and ‘possession’ (that is, the capacity to put the means of production into operation.
- In The Protestant Ethic and the Spirit of Capitalism, Marx Weber makes it clear that a capitalist enterprise and the pursuit of gain are not at all the same thing, it called for a new type of economic agent, the capitalist entrepreneur.
- One of Weber’s insights that has remained widely accepted is that the capitalist entrepreneur is a very distinctive type of human being. Weber was fascinated by that, he thought to begin with what was a puzzling paradox. In many cases, men—and a few women—evinced a drive towards the accumulation of wealth but at the same time showed a ‘ferocious asceticism,’ a singular absence of interest in the worldly pleasures that such wealth could buy. Many entrepreneurs actually pursued a lifestyle that was ‘decidedly frugal’.
- For Weber, capitalism was originally sparked by religious fervor. Without that fervor the organization of labour that made capitalism so different from what had gone before would not have been possible.
- In India, Hinduism was associated with great wealth in history, but its tenets about the afterlife prevented the same sort of energy that built up under Protestantism, and capitalism properly never developed. For Max Weber, ‘rational restlessness’ was the psychological make-up of Europe, the opposite of what he found in the main religions of Asia: rational acceptance of social order by Confucianism and its irrational antithesis in Taoism; mystical acceptance of social order by Hinduism; the worldly retreat in Buddhism.
- Weber located rational restlessness especially in Puritanism. Such persons are ‘enterprising’ because they are liberated from strong communal ties, which enable them to seek new opportunities without the constraints of collective tradition, customs and taboos.
- This clearly involves a certain ‘ego ideal’, a strong discipline, traits that Weber called ‘inner-worldly asceticism. Joseph Schumpeter stressed the central role of the capitalist entrepreneur, rather than the stock of capital, as the incarnation of technical progress.
- First, capitalist themselves are not the motivating force of capitalism, but instead entrepreneurs who invent new techniques or machinery by means of which goods are produced more cheaply.
- In any urban environment, people would have ideas for innovation, but who had those ideas, when and where they had them, and what they did with them were unpre- dictable. The second element of Schumpeter’s outlook was, that profit, as generated by entrepreneurs, was temporary.
- R.H. Tawney in 1921 argued that capitalism had created The Aquisitive Society. He thought that capitalism misjudged human nature, elevating production and the making of profit, which ought to be a means to certain ends, into ends in them.
- In particular, it sabotages ‘the instinct for service and solidarity’ that is the basis for traditional civil society. He thought that in the long run capitalism was incompatible with culture. Soviet experiment in application of the socialist model underwent various phases in accordance with the demand of the time.
- There were contradictions from within and outside which eventually led to its disintegration. At the same time, the same model was applied differently even in the countries under the Soviet influence, which gradually gave way to the dominant capitalist system.
- Yet, it would be immature to argue that this model was a complete failure as it was this model which forced the so called capitalist economies of the Western Europe to integrate welfare economic principles and strengthen social distribution networks albeit with a limited role for the state.
- On the other hand, the criticisms of the capitalist economic system and visions of alternative models have continued to drive the thinkers and activists alike.